Identifier
Created
Classification
Origin
03SANAA677
2003-04-07 13:54:00
CONFIDENTIAL
Embassy Sanaa
Cable title:  

ANTI-MONEY LAUNDERING LAW SIGNED, ENFORCEMENT

Tags:  EFIN KCRM PTER YM TERFIN ECON COM 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 02 SANAA 000677 

SIPDIS

E.O. 12958: DECL: 04/06/2013
TAGS: EFIN KCRM PTER YM TERFIN ECON COM
SUBJECT: ANTI-MONEY LAUNDERING LAW SIGNED, ENFORCEMENT
QUESTIONED

Classified By: Classified by CDA Alan G. Misenheimer for reasons 1.5 b.
and d.

C O N F I D E N T I A L SECTION 01 OF 02 SANAA 000677

SIPDIS

E.O. 12958: DECL: 04/06/2013
TAGS: EFIN KCRM PTER YM TERFIN ECON COM
SUBJECT: ANTI-MONEY LAUNDERING LAW SIGNED, ENFORCEMENT
QUESTIONED

Classified By: Classified by CDA Alan G. Misenheimer for reasons 1.5 b.
and d.


1. Summary: President Saleh signed the ROYG's anti-money
laundering legislation into law on April 5. The law was
written in consultation with the World Bank. While not
specifically mentioning terrorism, the law criminalizes money
laundering for the first time and requires banks to verify
names of their account holders. One local banking official
credits the law as a solid first step, but has strong
concerns about the Central Bank's ability to enforce it. The
Central Bank has recently intervened to shore up the sagging
riyal. End Summary.

--------------
Anti-Money Laundering Law Passed
--------------


2. (U) The official newspaper al-Thawra ran a front page
story announcing that President Saleh signed Law 35 of 2003,
the Anti-Money Laundering Law, on April 5. The new law
requires banks to verify the names and documents of account
holders and criminalizes money laundering. To coordinate
enforcement and unify reporting procedures, the law
establishes a committee composed of members of the banking
community and representatives from the Ministries of Foreign
Affairs and Finance under the oversight of the Central Bank.
The law also encourages international cooperation,
facilitates information exchange with other nations, and
includes provisions allowing the extradition of non-Yemenis
convicted under the law. (Note: Yemeni law does not allow for
the extradition of Yemeni citizens.)


3. (U) According to press reports, the law defines money
laundering as the illegitimate hiding of revenue generated
from such crimes as kidnapping, drug smuggling, and illegal
arms trade. The law does not specifically mention terrorism,
but many of the acts associated with the funding of terrorism
would be covered by this law. Those convicted of money
laundering could face up to five years in prison and
confiscation of any assets used illegally. Ibrahim
Al-Nahari, Director of External Relations at the Ministry of
Finance, who had flown to Washington last December to discuss

provisions of the law with the World Bank, told Pol/Econoff
that all of the Bank's suggestions were incorporated into the
law.

--------------
Enforcement
--------------


4. (C) Regional Manager of the Arab Bank in Yemen, Mahdi
Alawi (please protect),called the new money laundering law a
good step forward in the evolution of banking in Yemen.
Noting that the Arab Bank already follows many of the
provisions under the law because it makes good business
sense, he said this law will force domestic banks in Yemen to
know their customers -- a practice, he said, that is not
common in Yemen.


5. (C) Government ministries and organizations are mandated
by law to use the Yemen Central Bank for accounting and money
disbursal. According to Alawi, former Prime Minister Abdul
Karim Al-Iryani guided this restriction into law, hoping that
the government would have more control over transactions.
However, Alawi said, the exact opposite has happened, and
there is less control over the way the Ministries spend their
funds because the Central Bank is unable to investigate
discrepancies and has no financial intelligence operation to
review unjust accounting practices.

--------------
Transparency Laws Still Needed
--------------


6. (C) An even greater problem, according to Alawi, is that
Ministers and other high-ranking officials are allowed to
have personal accounts in banks and are not required to
report their financial holdings to the government or the
public. (Comment: This problem will likely persist because
the anti-money laundering law has no provision for financial
reporting by government officials. End Comment.) Alawi said
that the corruption in Yemen involves small amounts of money,
and that Yemen compared favorably to what he saw in Nigeria.
However, he cautioned, in the banking industry, misuse of
small funds is even harder to discover and report to
regulatory officials.

--------------
Central Bank's Fiscal Policy is Sound
--------------


7. (C) Alawi praised the Central Bank's tight control of
fiscal policy, noting positively that the recent injection of
approximately fifty million USD to keep the riyal strong
against selling related to fears the Yemeni economy would be
hurt as the war in Iraq began. However, he noted that the
Central Bank was walking a fine line between keeping the
currency stable and market pressures that are pushing the
riyal down. Alawi expects that the riyal will drop slightly
in the coming year because most experts, including the
Economist Intelligence Unit, expect economic growth to slow
because of an expected drop in the price of oil.


8. (C) Comment: The Anti-Money Laundering law is a
significant step forward for the Republic of Yemen. However,
enforcement issues will be the true test of Yemeni commitment
to having a well-regulated banking industry. Colleagues in
the banking industry and at the World Bank have praised the
Central Bank for its tight control of fiscal policy. The
next question is if they will be given the means and
authority to enforce the new law. Yemen has a pattern of
passing laws that are generally praised by the international
community, but falls short on enforcement. End Comment.

MISENHEIMER